Related entities for project bank accounts
On 1 March 2021, project bank accounts were replaced with a new streamlined trust account framework. Read about the new trust account framework.
The following information only applies to project bank accounts for certain government contracts with tenders released between 1 March 2018 and 28 February 2021.
If a head contractor decides that they need a project bank account (PBA) for a building contract and enter into a subcontract with a 'related entity', they and the subcontractor may have more compliance obligations.
The related entity provisions for PBAs ensure that:
- subcontractors working on a building contract are paid through the PBA
- subcontractors' retentions are protected.
The provisions help head contractors meet PBA requirements.
Note: The related entity provisions don't apply to suppliers.
What is a related entity?
A subcontractor is a related entity for a head contractor if:
- for individuals: they're members of the same family (see definition below)
- for an individual/corporation: the individual, or a member of the individual's family, is a majority shareholder, director or secretary of the corporation or a related body corporate of the corporation; or has 50% or more interest in the corporation
- for an individual and a trustee of a trust: the individual or a related entity under another provision of section 19 is a beneficiary of the trust
- for corporations: they're related bodies corporate
- for a corporation and a trustee of a trust: the corporation or a related entity under another provision of section 19 is a beneficiary of the trust
- for trustees of 2 or more trusts: a person is a beneficiary of both trusts; or a person is a beneficiary of one trust and a related entity under another provision of section 19 is a beneficiary of the other trust
- the persons acquire interests in a landholding trust and the acquisitions forms evidence, giving effect to or arise from what is substantially one arrangement.
- the persons acquire interests in a landholding trust and the acquisitions form, evidence, give effect to or arise from what is substantially one arrangement.
'Family' is defined as:
- the person's spouse
- a parent of the person or the person's spouse
- a grandparent of the person or the person's spouse
- a brother, sister, aunt, uncle, nephew or niece of the person or the person's spouse
- a child of the person or the person's spouse
- a grandchild of the person
- the spouse of any person mentioned in the previous items (except the first item).
For a person, 'spouse' includes a de facto or civil partner.
Head contractor obligations
If a head contractor subcontracts to any person, corporation or entity who is a related entity for the purposes of a PBA, they must complete a S21 notice of related entities form, and provide a copy to the Queensland Building and Construction Commission (QBCC) and the principal for the building contract.
Submit this form within 5 business days of entering into the subcontract with a related entity.
The related entity subcontractor continues to be a beneficiary of the PBA and is paid from that PBA.
If the subcontractor further subcontracts any work, the subcontractor may be required to establish a PBA. If this is the case, the head contractor will need to pay into that PBA, as if it were the principal.
A subcontractor needs to establish a PBA (separate to the PBA established by the head contractor) if they meet all these criteria:
- are a first-tier, related entity subcontractor
- enter into a subcontract with a head contractor
- further subcontract all or part of the building work (i.e. enter into a second-tier subcontract or a 'sub-sub-contract').
They must comply with all the obligations under the BIF Act and operate the PBA as if they were a head contractor.
- paying all second-tier subcontractors (or sub-sub-contractors) as beneficiaries from the second-tier PBA
- using payment instructions to make those payments
- holding subcontractors' retentions in the retention trust account and disputed amounts in the disputed funds trust account where required
- providing all forms and notifications as required under the BIF Act, including payment instruction information to the head contractor (acting now as principal) and second-tier subcontractors.
The head contractor will make payments to the subcontractor into the general trust account of the second-tier PBA. They may pay themselves from this account according to payment provisions in chapter 2 of BIF Act.
If you're a subcontractor needing to establish a second-tier PBA, read about the PBA obligations in the Head contractors guidelines (PDF, 981KB).
- Learn more about setting up a PBA.